Becoming one with your finances

Last night I read a very interesting article about a woman who just discovered her husband had more money in his 401k than she had is hers while making the same income. They have both been saving for several years, but he had been putting a larger percentage into his plan than she had put in hers. This came to light when they were applying for a home loan and she saw his account balance for, presumably, the first time. There were quotes like we are “very open with each other about our finances.” “He had saved about three times what I had.” “He’d be in way better shape come time to retire.” “I sat down, did the math, figured out what I could afford to contribute without feeling strapped for cash each month.” “Upping my contribution now makes my paycheck a bit smaller … maybe I have to skip a dinner out every now and then.” “I’ll catch up before you know it.”

When I read these quotes to my wife she said, “it doesn’t sound like they’re married.”

That was exactly what I thought. When you get married, you cleave together and become one. But many couples don’t seem to think that pertains to their checkbooks. An attitude of that is your money, this is my money, creates a division in the relationship. A household budget does not work nearly as well if the money isn’t combined into a single pot for distributing to all expenses and savings. She should not be figuring how much money she can afford to save from her paycheck. They should be figuring how much of the household income can be saved for their retirement. His retirement planning should not be independent of hers.

Households that divide up the expenses don’t seem to do as well. I have had conversations with husbands who say things like, “My check covers the mortgage and house expenses while her check covers the rest of the bills.” Then when something is over budget in her section, it is her fault for not managing her money right. But when an unexpected house expense happens, he will take some of her money to cover it, after all, it was an emergency, it wasn’t his fault. This is not the best solution.

Keeping a combined household budget is a better answer. All income is pooled and all expenses are accounted for from that pool. Both parties work together to establish savings rates and retirement plan contributions. There should be one household checking account and one household savings account that are used to run your lives. You can also have some other special savings accounts, like an emergency fund account, or retirement accounts, that are not used to run the house.

When everything is combined, you have the best chance of attaining your financial dreams. Both of you should be looking over the budget and plans. Don’t make that one person’s job so the other isn’t aware of what’s happening. One may not realize how tight the budget is this month when purchasing a new toy until after the purchase, and that could lead to a disagreement. The fewer of those, the better.

Work together in your financial life and you will create a greater harmony at home while achieving your dreams together.

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